THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CANDY CROWLEY, CNN ANCHOR: If you want a friend in Washington, get a dog.

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): Today, they call him Speaker Cruz. It's not meant as a compliment.

CRUZ: So many Democrats have invoked my name as the root of all evil in the world.

CROWLEY: A marquee name in the Tea Party takes on incoming from the other parties. Our exclusive with Texas Republican senator, Ted Cruz. Then --

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Take that vote. Stop this farce.

REP. JOHN BOEHNER, (R) HOUSE SPEAKER: All we're asking for is to sit down and have a discussion.

CROWLEY: The U.S. government is close to $17 trillion in debt and this Congressional authority to borrow more. Treasury secretary, Jack Lew, joins us on Washington's double trouble, showdowns over the shutdown and the debt ceiling.

Plus, is anybody winning or is everybody losing? Our political panel considers it all and weighs in on a way out.

This is STATE OF THE UNION.

(END VIDEOTAPE)

CROWLEY (on-camera): Good morning from Washington. I'm Candy Crowley. Five days into the government shutdown, there is some movement. The Pentagon is bringing most of its civilian employees back to work starting this week. The House approved a measure guaranteeing back pay to furloughed federal workers, and a senior House Republican tells CNN they're floating the idea of the bill that funds the government and lifts the nation's debt ceiling for six weeks.

The measure would not be tied to anything about Obamacare. And that might not sit well with Senator Ted Cruz. His take on this in a few minutes. But first, my interview with treasury secretary, Jack Lew, moments ago.

(BEGIN VIDEOTAPE)

CROWLEY: Treasury secretary, Jack Lew, is here. Mr. Secretary, thank you so much for coming in.

LEW: Great to be with you, Candy.

CROWLEY: If I can just sort of sum up what you've been saying, and that is come October 17th, you have run out of tricks, although, you don't use that word, but ways that you can sort of massage the numbers to keep it going so that you don't go over the debt ceiling the Congress has set. You need a new debt ceiling by October 17th. What happens on October 18th if you don't get it? LEW: Well, it's a very good question, Candy. And just to be clear, we crossed the debt limit in May. Since May, we've been creating some room to borrow by using what are called extraordinary measures. They've been used so many times. They're not as extraordinary as they used to be.

Tuesday I wrote to Congress saying I used my last extraordinary measures. I have no more. That means that on October 17th, we'll run out of the ability to borrow. We'll be left with some cash on hand. And, I've told Congress it will be roughly $30 billion.

And $30 billion is a lot of money. But when you think about the cash flow of the government of the United States, we have individual days when our negative or positive cash flow is 50 or $60 billion. So, $30 billion is not a responsible amount of cash to run the government on.

CROWLEY: -- where you're telling me that nothing would happen on the 18th?

LEW: Well, I can't tell you. We never got to this point, Candy, you know? We've never gotten to the point where the United States government has operated without the ability to borrow. It's very dangerous. It's reckless, because the reality is, there are no good choices if we run out of borrowing capacity and we run out of cash.

That will mean that the United States for the first time since 1789 would be not paying its bills, hurting the full faith in credit because of a political decision.

CROWLEY: Let me play you something that Congressman Steve King of Iowa, a Republican said, talking about the possibility of servicing the debt past this deadline.

(BEGIN VIDEO CLIP)

REP. STEVE KING, (R) IOWA: I don't think the credit of the United States is going to be collapsed. I think that all this talk about a default has been a lot of demagoguery, a lot of false demagoguery.

(END VIDEO CLIP) CROWLEY: So, the question is, is it technically possible for you to keep up with your debts? Can you not just pay the interest rate on these debts while this is worked out?

LEW: Candy, I got to tell you that anyone who thinks that the United States government not paying its bills is anything less than default hasn't thought about it very clearly. Let me ask you a question. Let me ask you, what happens if we're not able to pay Social Security? What happens if we can't pay disability and veterans payments on time?

(CROSSTALK) LEW: -- Medicare and Medicaid. In each of these cases, it means these families, businesses, institutions that are important won't be getting what they're relying on --

CROWLEY: Coming on the 18th, you won't be able to pay Social Security, you won't be able to pay Medicare, you won't be able to pay all of these things?

LEW: I'm telling that you that on 17th we run out of our ability to borrow, and Congress is playing with fire. If they don't extend the debt limit, we have a very, very short window of time before those scenarios start to be played out.

CROWLEY: Could you keep up on servicing the debt, that is paying the interest on the U.S. debt, therefore, not defaulting as you contend?

LEW: Candy, if the United States government for the first time in its history chooses not to pay its bills on time, we will be in default. There is no option that prevents us from being in default if we don't have enough cash to pay our bills.

CROWLEY: But very often, in bills and correct me if I'm wrong, can you not pay the interest? I'm just trying to figure out wiggle room, because what Republicans are saying, is these guy do this all the time as we run up. Look at Wall Street. It's kind of looking at it. This doesn't seem to be that big of a deal this time around.

No one's been threatening to downgrade the U.S. credit worthiness. So, the question is, is it true, as they say, that you can service the debt beyond the 17th?

LEW: Candy, let me put this in context. We are the strongest, most important economy in the world. We've already seen that when government shutdown, the kinds of gridlock and brinksmanship in Washington hurts people and it hurts the economy. We saw it in 2011. What happened is we approach the point of reaching the debt limit.

You now have people who are saying, oh, it won't be that bad. Well, I challenge them to answer the questions that I asked you. They're willing to concede if we don't pay interest and principal on the debt if that's bad. Well, you know, it is bad, but there are a lot of things that are bad. You can't pay all the bills if Congress doesn't raise the debt ceiling. And none of these bills are new. These are commitment that Congress made that's paying old bills. It would be like somebody saying I ran up my credit card and I decided not to pay it. You can't do that. The United States government is just too important to the world. Our currency is the world's reserve currency.

CROWLEY: Is this -- could the president, is there a mechanism and I think we went through this last time around in 2011. Is there a mechanism for the president should the U.S. be unable to pay its bills? Is he able to unilaterally lift the debt ceiling? LEW: I think the White House has spoken quite clearly to this -- the president does not have the authority to take action in that kind of a way -- the president consulted with his lawyers, and that's the conclusion that he's reached. You know, there's a desire here for there to be some kind of a magic solution.

There's an easy solution, Candy. A majority in Congress would do the right thing if given a chance to vote to open the government. A majority in Congress would do the right thing if given a chance to let us pay our bills. Congress needs to work. They need to do their job, but the majority needs to be given a chance.

CROWLEY: If it is as bad as you say it would be if this happens, if they don't raise the debt ceiling -- Congress doesn't raise the debt ceiling by the 17th, why wouldn't the president come to the negotiating table? If it's going to ruin -- it's going to shake the world markets, if it's going to ruin our credit worthiness, you know, we're the superpower. We can't be not paying our debts. If it's that vital, why isn't he at the bargaining table saying what can we do here?

LEW: Candy, I think you know that the president has been, is, and will always be looking for that way to negotiate to find a sensible middle ground. He did it in 2011. He did it last year. He did it this year in his budget where he put forward tough policies.

CROWLEY: If this is so dire, why not do it again?

LEW: You know, I think if you look at where we are right now, we've just gone through a couple of months where some very extreme parts of Congress to control. I don't think the leadership in Congress wanted a government shutdown. They ended up with a government shutdown because of the tactics of an extreme group trying to say, we're willing to do real damage if we don't get our way.

The president's message is clear. Congress needs to its job. They need to open the government. They need to make us to pay our bills and then new need to negotiate. And he is very much prepared to do that.

CROWLEY: -- the president still won't sit down. I mean, it's like -- it just seems like a duel message here. It's really, really important. Horrible things are going to happen if this isn't fixed, but I'm not going to negotiate.

LEW: You know, Candy, in 2011, there was a very dangerous turn in the political debate in Washington. You had the same 50 to 100 members who were really willing to default if they didn't get their way. I've been through a lot of budget debates. I've been through a lot of debt ceiling debates. Never did I hear people who said if it don't get my way, it's better to default. That's not acceptable now --

(CROSSTALK)

CROWLEY: Let me turn you quickly to the government shutdown, and in particular, you have inside the treasury department, the unit that monitors sanctions and imposes sanctions on those who try to help Iran or Syria militarily. We are now told that that office has been gutted, that it can no longer do its job because of the shutdown. As you know, Congressman Ed Royce, chairman of the House Foreign Affairs Committee wrote you a letter said wait a minute, you said that you certainly would make sure that all vital activities of the government go on.

And then, he said, "This recent staffing decisions leave me puzzled. I respectfully ask that you reconsider these ill-advised staffing decisions that undermine support for vigorous Iran sanctions and other critical national security efforts." It does seem that this fits under the classification of essential.

If the president is going to say Iran came to the table because we imposed and enforced sanctions, why you would let all but 17 members of that 100 plus office be furloughed?

LEW: You know, Candy, there's a simple solution here. Congress needs to vote and open up the federal government.

CROWLEY: But did you have to furlough these people? I understand you want the government open.

LEW: You look around the government, there are people with essential functions who are not coming to work because not everything that meets the common sense test of essential meets the legal test under a government shutdown. These people do very important --

(CROSSTALK)

CROWLEY: -- that the president's ability to carry out foreign policy certainly with Iran who we worry about nuclear weapons --

LEW: I think the work is very important. I think Congress is irresponsible and reckless for shutting the government down, but they also need to understand when they shut down the government down, there are consequences, because we don't have the legal ability to bring everyone back.

CROWLEY: Treasury secretary, Jack Lew, thank you for coming by.

(END VIDEOTAPE)

CROWLEY: We are back now with Senator Ted Cruz. I do believe, senator, that he was sort of referring to you in some of those remarks about the extreme members of Congress that they -- people that they characterize as extreme shutting down the government to the harm of the U.S. The debt ceiling. How should Republicans approach that?

CRUZ: Well, I mean, let me commend actually Secretary Lew for not being willing to demagogue on the debt ceiling the way sadly his boss, President Obama, has. If I counted it right, three times you asked him directly come October 17th, will the United States default on its debt? And three times, he avoided answering. And the reason is the answer is, of course not.

Now, frankly, what I wish he said and what any responsible president would say is you come out and say under no circumstances will the United States ever default on its debt. That should be the answer. But Secretary Lew at least went half way there by refusing to repeat the claim that President Obama's made that there is some risk of our default --

CROWLEY: But would you agree that it's not good for the U.S. not to be able to borrow past where it is, because at some point, it will have to default. How should the Republicans handle the debt ceiling? Do you want some, for instance, faction of the president's health plan to be attached to that in exchange for lifting the debt ceiling or because it's so important, should Republicans say we need to lift this debt ceiling?

CRUZ: Look, in my view, the debt ceiling, we should look for three things. Number one, we should look for some significant structural plan and reduce government spending. Number two, we should avoid new taxes. And number, we should look for ways to mitigate the harms from Obamacare. You know, since 1978, the debt ceiling has been raised 55 times.

CROWLEY: So, you think that some facet of the president's health care plan should be attached to an increase in the debt ceiling?

CRUZ: The debt ceiling historically has been among the best leverage that Congress has to reign in the executives.

CROWLEY: So, yes?

CRUZ: Yes. Yes.

CROWLEY: And what else?

CRUZ: But my point is that there's great historical precedence. Since 1978, we raised the debt ceiling 55 times. A majority of those times, 28 times, Congress has attached very specific and stringent requirements, many of the most significant spending restraints things like Gramm-Rudman, things like sequestration came through the debt ceiling.

And so, the president's demand jack up the nation's credit card with no limits, no constraints, it's not a reasonable demand.

CROWLEY: How far are you willing to go because I'm going to imagine that a number of your Republican colleagues as well as all the Democrats are going to say we cannot mess around with the debt ceiling here. It's too important. It's in a bad message. It will rock the economy. Let's increase the debt ceiling for X amount of time or X amount of dollars. How far would you go to stop that in order to eke out --

CRUZ: Look, in my view we ought to have one fight at a time. So, we're right now in the middle of a government shutdown.

CROWLEY: But it's all going to pull together. You would agree with that.

CRUZ: It may or may not. I don't think it should. I think we still got some time on the debt ceiling. And I think right now, we need to deal with the fact that a significant percentage of the government is shut down because Harry Reid and President Obama have refused to negotiate.

And you're seeing House Republicans over and over again passing reasonable bills to open vital government services and President Obama and the Democrats refusing to negotiate. We have to focus on that first, because that's the immediate challenge.

CROWLEY: Well, I -- I grant you that both sides see the other side as at fault here. But that's about blame. I think what the American people want to know is, where does this end? You talked last night -- you were at a Virginia republican event in Richmond and said Republicans will win this.

And by that, I believe you meant what you wanted in exchange for a spending bill. What does win this mean to you? What does that have to look like for a Republican victory?

CRUZ: Let me be clear, I didn't say Republicans will win this. Listen, I think career politicians in both parties have been part of the problem. What I said is the American people are going to win. And that's something very --

(CROSSTALK)

CROWLEY: What does the American people win look like to you?

CRUZ: Look, what the American people want is they want our government funded and they want to stop the harms from Obamacare. Obamacare is hurting millions of people. It's killing their jobs. It's forcing them into part-time work. It's driving up health insurance premiums, and it's causing millions of Americans to lose or risk losing their health insurance. That's a win for the American people is actually responding to the real harms that are coming from Obamacare. CROWLEY: So, let me show you some polling that was done recently. And the question encompasses both of those things you just talked about and that is, do you believe, the question is, that in order to change Obamacare defunded the government should shut down if that's the price for getting it done?

And the CBS poll basically showed 72 percent totally disapprove of that tactic. So, if we're listening to what the American people want, they don't want a government shutdown simply because there are differences over the health care law.

CRUZ: But Candy, as you phrase that question, I'm in that 72 percent. I don't want the government to shut down. I've said that throughout. And the reason the government has shut down, you know, you mentioned in fact earlier you guys ran a graphic on the screen both sides refuse to negotiate. And look, I understand the natural reaction you see an impasse in this sort of natural reaction is, well, both sides are to blame.

But I don't think the facts support that, because if you look, the House Republicans repeatedly had been compromising, had been passing one bill after another, first of all, on Obamacare itself, and then secondly, working to restart vital government functions. And the Senate Democrats over and over again and President Obama has said they won't negotiate. They won't talk.

They have not moved one inch. And when you've got one side that's compromising the other side that isn't, I don't think it's an accurate or fair description to say that neither side is negotiating.

CROWLEY: But it is accurate to say is it not that absent the Republicans attaching things to do with the president's health care act, a clean CR would have gone through? That's accurate, correct?

CRUZ: That's actually not Accurate. So, for example, you played the president saying let's have a vote. Let's stop the farce. I agree with President Obama. There are eight bills that the House has passed that are piled up on Harry Reid's desk. And Harry Reid will not let the Senate vote. So, for example, Jack Lew, Candy, said we need to fund our veterans and disability payments. I agree.

The House passed a bill to fund our veterans. Every Senate Republican believes we should fund our veterans regardless of what happens in the shutdown, our veterans shouldn't pay the price. And right now, Harry Reid and the Senate Democrats are refusing to have a vote and they're blocking it. The only reason the VA is not adequately funded right now is because Harry Reid and the Democrats are blocking it. That's not reasonable.

CROWLEY: How about a cooling off period? There's this idea being floated -- CNN is reporting kind of a cooling off period, that you pass a clean spending bill for six weeks, and on it, you also increase the debt ceiling for six weeks. And in that six weeks, you negotiate on how to fund the government for the rest of the fiscal year and you negotiate the debt ceiling.

CRUZ: Candy --

CROWLEY: That would accomplish, would it not, what you want, which is the president at the table?

CRUZ: Look what you just asked. You said how about the agreement be give the Democrats 100 percent of what they want with no changes whatsoever. They're not talking now, but if you give them everything you want, then they'll talk. No, they won't. Look, we saw this week President Obama after months of refusing to talk to Congress finally invited Congressional leaders over, sat down and said hi, I invited you here to say I will not negotiate.

Their view is not reasonable. It is Republicans in Congress who are passing bills to reopen the parks, to reopen the memorials, to fund cancer research, to fund our veterans, and it is the Democrats who are refusing to have a vote. I mean, Candy, why won't Harry Reid let the Senate vote on the eight bills the House has passed to fund vital parts of the government?

CROWLEY: I think he would say because he thinks he's being blackmailed, but I want to continue this conversation. We'll be back. We got to take a quick break. We want to talk about a couple of things when we return. I also want to talk about some of the blowback you're getting from members of your own party. They reportedly gave you an earful behind closed doors saying you don't have an end game strategy and you're, quote, "selling snake oil." Your chance to respond after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. PETER KING, (R) NEW YORK: I think Republicans have to be more responsible. We have this wing of 30, 40, or 50 people who are driving us over a cliff. That has to end. We have to stop listening to Ted Cruz.

(END VIDEO CLIP)

CROWLEY: That's Congressman Peter King. He is a frequent and vocal critic of Senator Cruz. Will voters blame Republicans for the shutdown and could the price be their majority in the House? More with Senator Ted Cruz next.

(COMMERCIAL BREAK)

CROWLEY: We are back with Republican senator, Ted Cruz. As you know, Speaker Boehner is out today also on the Sunday morning circuit and he said that there are not the votes in the House for a clean increase in the debt ceiling, that there is a history of debt ceiling increases being tied to other policy things, and that he wants to sit down with the president to talk about that.

My question to you is, if what the speaker can pass out of the House does not include health care reform but includes other things, entitlement reform or some manner of tax reform, would that be OK with you or do both the shutdown and the debt ceiling have to have some component rescinding some part of Obamacare?

CRUZ: Look, I think the speaker is exactly right. And I commend his leadership, because the House of Representatives has been listening to the American people and what House Republicans have been doing consistently throughout this is trying to resolve this matter. I mean, they've been passing bill after bill to fund vital priorities of the government, and the Senate Democrats, there are eight bills piled up on Harry Reid's desk that he won't allow. CROWLEY: I understand. I heard you say that, but the questions is, does some part of health care reform -- repeal in some way have to be attached to a debt ceiling for you to approve of it?

CRUZ: Look, as I said, I want to worry about the debt ceiling after we get through the CR. My view is, what does Congress need to do now whether it's the CR or debt ceiling is, we need to prevent the millions of people who are losing their jobs, who are being pushed into part-time work, who are facing -- you know, for a young healthy 30-year-old male who's single, recent study showed that under Obamacare, he's going to pay health insurance premiums going up 260 percent. We need to address that.

CROWLEY: If this is more than anecdotal, if this is a widespread problems that spelled doom for the president's health care plan, why not just let it rip? Let it go into effect and have it cave on its own? Because then, I think you'll have much better numbers in the polls of people that want to get rid of health care.

CRUZ: Look, it's a great question, and the reason is, if you listen to what Senator Harry Reid said, he said that he believes that Obamacare will lead inevitably to single payer government socialized health care. Listen, I agree these things are going to collapse, but in the process of collapsing, it's going to destroy the private health insurance system.

You've got hundreds of millions of people who right now have private health insurance that is jeopardized by Obamacare. So, when it collapses, I don't want it to destroy the health insurance we have now. And listen, Candy, if one of your viewers doesn't trust me because I'm a politician which actually makes sense, because I'm a republican, maybe they would trust James Hoffa who's the president of the teamsters.

James Hoffa said in writing that Obamacare right now is destroying the health care of millions of working men and women. He used the word destroying. I agree with Mr. Hoffa.

CROWLEY: Because he wants a subsidy for collective union bargaining health care benefits.

CRUZ: I mean, let's be clear, what he's saying is that his workers are at risk of losing their health insurance, and that same thing is true. It's why U.P.S. just a few weeks ago sent a letter to 15,000 employees saying you're losing your spousal coverage. All of your Husbands and wives are losing the health insurance they have right now.

Now, there was a time when President Obama said if you like your health insurance, you can keep it. We need to make that commitment. We need to honor that commitment.

CROWLEY: I want to talk to you a little bit about the politics of this. President Obama gave an interview to the "Associated Press" recently and he had this to say about new senators. I think maybe you'll recognize or think this might be a little bit about you. "My attitude was," when he was a freshman senator, "I should just keep a pretty low profile in the Senate and just do the work. I didn't go around courting the media and I certainly didn't go around trying to shut down the government."

The president just the latest in a string of people who've been criticizing you that, in fact, you weren't here when Republicans fought tooth and nail to stop the president's health care bill. And now, you sort of join forces with people who are now calling your fellow Republicans rhinos, Republican in name only and they're soft Republicans and we need to replace them. What's your response to what the president has to say about you and others?

CRUZ: Look, the fact that you're saying so many nasty partisan jabs from Democrats and --

CROWLEY: And from Republicans as well.

CRUZ: But you just quoted the president, and certainly, Harry Reid and Senate Democrats have not been shy and using all sorts of ad hominem inflammatory attack, the fact that you're saying those attacks I think is indicative of the fact that we're winning the argument. Obamacare isn't working. You don't see any Democrats defending Obamacare.

CROWLEY: -- hasn't started.

CRUZ: But the harms have. People are losing their health insurance right now. That is because of Obamacare. People are being pushed into part-time work right now. that Is because of Obamacare. And so --

CROWLEY: And your Republican colleagues agree with you on that? They agree with you that they don't want the president's health care plan, many of them fought against it. They do not agree that shutting down the government is the appropriate way to -- and I know you think Harry -- I understand that your take is --

CRUZ: Let me be clear on this. Let me be clear on this. I don't support shutting down the government. I've said that throughout. And if you want to focus, as I think you do, on areas of bipartisan agreement, a week ago, the House passed a bill funding the men and women of our military.

CROWLEY: Right.

CRUZ: The senate unanimously passed it. But then, the House has passed eight other bills funding things like our veterans, funding things like the national parks, and Harry Reid has killed them. Now, let me be clear, because it's important to understand. These bills, none of them even mention Obamacare. They're programs completely unrelated to Obamacare.

And the position of President Obama and Harry Reid is, if you aren't funding everything in the government, they will fund nothing. You know, we launched a national website, fundourvets.com that says, listen, regardless of the shutdown, veterans ought to be above politics. They ought to be bipartisan agreement. We need to honor our commitments to our veterans.

CROWLEY: But obviously, they feel that if you can use this kind of leverage, they feel it's blackmail. But let me ask you something about your fellow Republicans.

CRUZ: But Candy, let me press back. It's twice you've said Harry Reid would say it's blackmail. And I want to press back, because I actually -- I think that's a false claim with no basis. The bill that the House passed on the VA simply funds the VA. It doesn't mention anything about Obamacare. It doesn't mention anything about anything else. Now, for hundreds of years, the way Congress is appropriated has been one topic at a time. How is it blackmail to say, we think we should fund the veterans? Do you agree? That's a yes or no vote. Now Harry Reid refuses to let the Democrats vote on that. But how is it blackmail to say, we may not agree on everything but is there anything we can agree on? We ought to agree on supporting our veterans.

CROWLEY: Do you think you hurt the Republican Party brand?

CRUZ: Not remotely. But I also think far too many people are worried about politics. Listen, if we worry about what is impacting the American people, the politics will take care of itself. The politicians that are gazing at polls, there is a reason why the most common sentiment across this country is that politicians in Washington aren't listening to us. There's a reason why Congress has 10 percent to 15 percent approval rating. In both parties, the politicians in Washington try to maintain their power instead of listening to the American people.

CROWLEY: But again, you know, you can listen to various portions of the American public. And we've seen poll after poll showing indeed that Americans are split about the president's plan. But in the portion of people that don't like it includes people who do want single payer, who think it doesn't go far enough. It is - it is existing law that you are trying to overturn. Why not just get out there and win elections and overturn it with the Republican Senate and a Republican House and a Republican in the White House? Instead of shutting down the government which I think you would concede hurts people who have nothing to do with Obamacare.

CRUZ: Listen, we did have an election. Republicans won a majority of the House of the Representatives. And the constitution gives the House of Representatives the principle responsibility for appropriations for spending. There was a press conference last week where Harry Reid said, who is John Boehner to decide what our priorities should be in spending? Well he's the speaker of the House and the constitution gives him that authority. Now there was also a press conference that I know you're familiar with, in which a reporter from CNN Dana Bash asked him about the NIH funding, funding for the National Institutes of Health. He said if you can save one kid with cancer, isn't it worth doing it? And his response, he said, why would I care about that? And then he proceeded to lecture and insult her. Now listen, Dana as you know is not some right-wing kook. She was doing her job and the response from the Democrats was, how dare you question us. We're going to shut down everything and we don't intend to budge. That's not a reasonable decision.

CROWLEY: I have to close it off there. Really wish we had more time. I hope you'll come back. Dana Bash by the way is a big girl. She's just fine but thank you very much for joining us. We appreciate it, Senator Ted Cruz. When we return, our panel on this week's winners and losers. Also Saturday's U.S. military raids against terrorists in Africa and whether they'll give the president a little more leverage for his domestic agenda.

(COMMERCIAL BREAK)

CROWLEY: Boehner versus Obama. Who is going to win this thing? Back in a moment.

(COMMERCIAL BREAK)

CROWLEY: Joining me around the table, Congressman Steve King, Republican from Iowa, CNN CROSSFIRE host, Stephanie Cutter, Ross Douthat, CNN political commentator and "New York Times" columnist and Congresswoman Donna Edwards, Democrat from Maryland. I want to talk just briefly about the breaking news this morning that there have been two apparently successful raids by U.S. Special Forces, one in Libya for a man we've been looking for for almost 15 years. The other in Somalia against an al-Shabaab unit. They of course being responsible for the mall terrorism not that long ago.

When you contrast this to the Syria we're going to bomb, we're not going to bomb and the criticism that the president took for that this is a pretty forceful, looks like a successful mission so far. Does that strengthen his hand at home? Is there a translation there that the -- that he gets a boost from this?

REP. STEVE KING (R), IOWA: Candy, I think that this is a plus. And I'm certainly glad that we have that kind of orders (ph) out there for those missions. And our hats are off to our Special Forces that have pulled this off and they're coming back without American casualties. It strengthens his hand probably marginally but it's a good thing. And I'm one who said that the president has a constitutional authority to order our troops into battle. He needs to come back to us if it's a long engagement. But I think he would have been better off if he was going to go into Libya or excuse me, into Syria, if he had done without consulting with Congress for a precision strike. I think that's what caused the problem. And now we're in a situation where he went to Congress for advice and now he's negotiating with the Russians. So we'll see. It strengthens his hand marginally.

CROWLEY: I think we can all agree it's better if you don't have to deal with Congress. But sometimes -

(CROSSTALK)

REP. DONNA EDWARDS (D), MARYLAND: It certainly demonstrates the president's resolve as he's demonstrated during the course of the presidency. And it says to the rest of the world, we're not going to forget. And we're going to keep coming after you if you've done harm to us and our allies around the world. And I think that is really important. What's clear to me though is that the president has, you know, an obligation around the world. America matters. And we need to get our House in order here in the United States and in the Congress so that we have a government that fully operates in order to make certain that the president has the strongest hand possible.

(CROSSTALK)

CROWLEY: Isn't that always the problem? Yes, this is, you know, something that the Americans look at and think, yes, we're out there with, you know, cream of the crop folks that can get the job done. But back home, I need a job or we need Congress to end the shutdown.

ROSS DOUTHAT, CNN POLITICAL COMMENTATOR: I mean this isn't the Bin Laden killing, right? This is the killing or capture of figures who I think we can assume most Americans haven't heard of and most Americans are not paying close attention to. I think it's a sign of - obviously it's a plus for the president. It's a good thing for the country and it's a sign of sort of the low level war on terror strategy that continues apace all around the world, no matter what is happening with debates over Syria or domestically. But it doesn't -- I don't see it having really any ripple effect in domestic politics.

(CROSSTALK)

KING: It does make it clear that we can operate in Somalia. We can operate in Libya. That's a message that I think will resonate in the next few days.

(CROSSTALK)

CROWLEY: Stephanie, let me get you to move on and just do winners and losers for me this week. It just seems that we kind of have the table set. President says no, not going -- we aren't negotiating. This is blackmail. Republicans go, wait a second, not negotiate? I mean they're the ones that are holding this up. Where's our argument going?

STEPHANIE CUTTER, CNN CROSSFIRE HOST: Well first of all, in a government shutdown, let's be clear. Nobody wins including the American people. And we're seeing the impacts of that every single day. But secondly, this is a crisis that your guest who was just on here manufactured. Republicans --

CROWLEY: Senator Cruz. You heard what he said.

CUTTER: I heard what he said and we can address that. But let's be clear, Speaker Boehner didn't want to attach health care to the C.R. Majority of Republicans in the House didn't want to attach health care to the C.R., which is the continuing resolution to fund our government. But because of the campaign that Senator Cruz and a few others select people ran from the outside, it pushes Republicans into a corner. And they've been attached with every warning possible from the president, from Democrats, from the American people, don't do this. Because it's not going to work out well for you. He did it. They did it. And now we're at an impasse. And this is a self inflicted wound. They're looking for somebody to get them out of this now. They're trying to blame Harry Reid, president for, you know, a fire that they started.

CROWLEY: Let me go ahead and let you jump into this. And let me just note that this now sounds as though it's going to bleed into the debt ceiling simply because John Boehner said, we don't have the votes to pass that debt ceiling, a clean debt ceiling. And Senator Cruz said, no, the debt ceilings are used to affect changes in policy.

DOUTHAT: I think we started with the winners or losers Boehner versus Obama, right? I think if you're just looking at it from a purely legislative point of view, I think in the end Boehner wins in the sense that some kind of concession will be made by the White House and by Democrats on some specific issue and it will be tied into the debt ceiling and tied to the shutdown. So the president can still say, I didn't negotiate on the debt ceiling but we made this concession on the shutdown. It will end up being something like the medical device tax repeal, something like that. I think the danger for Republicans and the congressman can speak to this better than I can, is that kind of minor sort of tactical victory, is it worth the path? Is it worth the sort of P.R. hit?

CROWLEY: I want to get you to hold. And I will get both of you, all of you to comment when we return. We want to talk about the end game to a stalemate and who's going to pay the price in the next election.

(COMMERCIAL BREAK)

CROWLEY: So how does this end or will it require divine intervention. Our panel on how this all shakes out next.

(COMMERCIAL BREAK)

CROWLEY: We are back with Congressman Steve King, Stephanie Cutter, Ross Douthat and Congresswoman Donna Edwards. How is this going to end? I'm going to start with our wings here, simply because, give me the exit ramp here that's practical.

EDWARDS: I'll start. Two hundred Democrats have said we would support a clean continuing resolution funding the government. Twenty Republicans are on record saying that they would. Clean C.R., fund government operations, and then let's pay our bills.

CROWLEY: That's what you hope. What do you think will happen?

EDWARDS: I actually do think that - I really do think that that will happen, because people recognize what's happening to the economy, you know, every single day that we don't fund the operations of the government, we are actually losing $10 billion. And so it really makes a difference for the country. It makes a difference to the people whether we do it. And with the debt ceiling, you know, the government was just starting to run, housing prices up, employment going up, small businesses hiring, banks loaning -- all of that shuts down if we send a signal that we'll default on our obligations. CROWLEY: And that's a debt ceiling now and we seem to be rolling in -- this scenario assumes that Speaker Boehner would say to his caucus I know that not all of you are with me, but we're going to put this on the floor clean. KING: Speaker Boehner has made it clear for nearly three years that he would do everything to avoid a shutdown. Nonetheless the march of history took us to this point. Now we have a partial shutdown, not a complete shutdown. We've heard the announcement from the secretary of defense that they're going to roll back or put back to work over several hundred thousand civilian workers in defense. We voted yesterday in order to fund our federal employees retroactively. I think we agreed on that piece. And so we don't know how this is going to end. But I can tell you that the lid is on the pressure cooker. The clamps are down. The pressure gets turned up every day and new proposals come forward. Now there was a bipartisan effort, unanimous effort announced yesterday to fund our federal employees. We will march down that line a piece at a time. Opening up as many pieces of government as we can, because all Republicans have voted to fund every aspect of the government except Obamacare. So let's see where this gets to the point where we get down to the end one piece at a time, one move at a time on this gambit we talked about.

(CROSSTALK)

CUTTER: And I don't understand where -- so the only reason we're not fully funding government right now, because the majority of the House wants to fully fund the government with no strings attached -- is because of a fraction of Republicans in the House of Representatives.

(CROSSTALK)

CROWLEY: Can I just point out that all Republicans have voted this way? I mean we keep saying a faction. But let's face it, the Republican caucus has stayed together.

CUTTER: Every day more and more Republicans in the House are saying let's just go ahead and vote on this. Let's get this over. Let's fund our government. Now -- but at the same time they're voting on these individual bills to fund. Where does that stop? You know, what are you going to choose not to fund if that one thing is holding us up from running our government?

EDWARDS: You know that what they did was they shut down government totally, but they want to fund it piecemeal, a step at a time which is completely irresponsible.

(CROSSTALK)

CUTTER: And some of it is stuff that they had totally defunded in past budgets.

DOUTHAT: My question for the left-center members of our panel is, do you think that the White House has handled this shutdown well? Because my overall sense -- I'm basically with you on the tactics. I don't understand what the end game that the conservative wing of the House has in mind. And I noticed that the congressman declined to say what end game they have in mind.

(CROSSTALK) DOUTHAT: How many - I think, you know, the White House thinks they're winning. They are winning in public opinion, but they keep blundering into these sorts of P.R. disasters where they're closing the World War II Memorial, which, you know, I live in Washington, you wander through the World War II Memorial every day. There's never any gates or anything on it. So I just wonder, do you think that's going well?

CROWLEY: Twenty seconds.

CUTTER: I've been in the White House on the brink of a shutdown. Those decisions really aren't made by the White House. They're made by the federal government according to law. According to law.

(CROSSTALK)

CROWLEY: The Iran monitoring team, right? I mean the president -

(CROSSTALK)

CUTTER: Then what do you take that away from? Because there's a lid here. So what do you take that away from? And I will note that Bob Dole, the World War II veteran said -

Thank you for watching STATE OF THE UNION. I'm Candy Crowley in Washington. Head to CNN.com/SOTU for analysis and extras throughout the week. And if you missed any part of today's show, find us on iTunes, search, STATE OF THE UNION.

Fareed Zakaria, GPS, is next. His guest includes rock star Bono and the foreign minister of Iran.